China’s biggest property developer may be getting a bit too big for China.

China Vanke Co Ltd, the nation’s largest developer by market value, Thursday said it had teamed up with New World Development Co. to buy a residential site in Hong Kong for 3.4 billion Hong Kong dollars ($436 million) in its first development venture beyond the mainland. It wants to build small-sized apartments on the site in Hong Kong’s New Territories.

That winning bid followed close on the heels of the company’s announcement of a plan to convert its China-listed B shares into Hong Kong-listed H shares, helping to raise market expectations that Vanke would boost its presence offshore as it continues to grow at home.

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The share conversion could eventually enhance Vanke’s global recognition and let the company tap a bigger pool of investors for future capital raising efforts, said Vanke’s board secretary Tan Huajie, speaking at a press conference last week.

“Accessing international capital markets is a necessity for a firm which aspires to become a multinational,” said Mr Tan.

And there are other reasons for the recent moves offshore, as many mainland companies and others consider Hong Kong.

“Through our expansion efforts, we hope to raise Vanke’s management standards, improve our knowledge of the industry and search for more global partners,” said Yu Liang, Vanke’s president, speaking at the same press conference.

That appears to be underway. Officials disclosed they have already set up a team in the U.S., and they looking for partners there.

While the company may not plunge into the offshore waters head first, it is certainly looking for more opportunities outside of mainland China in the residential property sector, particularly as more Chinese investors have an appetite for an offshore home, analysts said.

Well-to-do Chinese are looking for investment opportunities in offshore property – so why not cater to them?

So far, Vanke’s focus on building smaller homes for owner-occupiers has helped its bottom line, even during a three-year government property-tightening campaign that was aimed at curbing speculation. It has operations in 60 cities around the country, with sales reaching 141.2 billion yuan ($22.7 billion) in 2012, up 16.2% from 2011.

But putting all its eggs in the domestic housing basket has its risks, industry players say. They note that Beijing’s policy makers could clamp down on the market more heavily if they believe that speculative activity is heating up once again.

Vanke also has only a limited presence in commercial property development and management, and that means it lacks a steady stream of income from office or retail rents.

But analysts said there are some potential pitfalls that Vanke needs to avoid as it steps offshore.

“Firstly, Vanke shouldn’t just replicate its entire business model abroad. Every place is different,” said Andrew Kam, a valuation director at Savills Shanghai.

“Property development is a very localized business as the market dynamics and structures can be very different. For Vanke, making acquisitions will be more effective and efficient,” said Mr. Kam. “They could find suitable overseas partners, acquire local sales expertise and professionals, for a start.”

So far, that has been Vanke’s strategy. In May, well before it joined forces with New World, Vanke acquired Winsor Properties, a Hong Kong-listed property manager that had years of experience in the commercial property segment of the Hong Kong property market.

And it is hardly the first to make the plunge as even some of its smaller competitors have already stepped into offshore markets. In September, Zhengzhou-based developer Xinyuan Real Estate bought a site in the New York borough of Brooklyn for $54.2 million. Nasdaq-traded Xinyuan plans to build a 216-unit condominium there, and it too noted real estate demand from China in the New York market.

Guangdong-based Country Garden last month (DSK: December) invested in a piece of mixed-use land in an industrial zone in southern Malaysia. It plans to build offices, apartments and a shopping mall on the site.

It is also not the first to shift its B share listing to Hong Kong. China International Marine Containers blazed that trail last year when it moved its Hong Kong-dollar denominated B shares to the Hong Kong exchange.

Vanke said it plans to convert its 1.3 billion Shenzhen-listed Class B shares–valued around HK$16.4 billion prior to the announcement–into Hong Kong-listed stock by without raising additional capital.

While Vanke said it has no need for more financing now, it might want to take advantage of the solid demand for bonds issued by Chinese property developers.

“China International Marine issued debt immediately after the conversion of its B shares to H shares. Vanke may do something similar as well,” said Jinsong Du, an analyst at Credit Suisse. Within weeks it had issued $600 million worth of commercial paper.

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